Amazon Is Reviewing Unprofitable Businesses And Reportedly Laying-Off 10,000 Employees
Amazon's leadership is carefully examining its devices division, which includes Alexa, as part of its ongoing cost-cutting review. According to a report from The New York Times, Amazon intends to lay-off roughly 10,000 workers in corporate and technology roles starting this week, mainly within the devices division.
- Alexa employs more than 10,000 people and receives a significant amount of investment capital
- According to The Wall Street Journal, Amazon's devices division, which includes Alexa, has experienced operating losses of more than $5 billion annually in recent years
This is in sharp contrast with Amazon's expansion during the pandemic. In an effort to keep up with an increase in online orders, Amazon hired more than 800,000 people between the end of 2019 and the end of 2021. Additionally, it made transactions worth more than $10 billion to acquire a primary-care healthcare company, a movie and television studio, and a manufacturer of robot devices during that time.
- As of December 31, 2021, Amazon had 1.6 million full- and part-time employees, a 102% increase from the 798,000 employees it claimed at the end of 2019
Less Room For Speculative Bets
While current speculative endeavors aren't considered bet-the-company risks, as some analysts consider Meta's full blown bet on the metaverse, Amazon currently has less money to work with.
"Experimentation and running with too many things that don't generate a return is no longer a luxury Amazon can afford," GlobalData analyst Neil Saunders said.
Because of an overbuild of the company's fulfillment capacity and the company's declining retail sales, Amazon's already tight margins are under pressure. Moreover, Amazon's AWS cloud division is no longer offering the same level of comfort as revenue growth has slowed.
- The majority of Amazon's revenue comes from its North American retail division, which has lost money for the last three quarters on an operating basis and is predicted to finish the year in the red
- AWS sales climbed 27% year over year in the third quarter, the slowest rate ever
Tech Giants Are Taking A Beating
According to a website tracking layoffs at tech companies, nearly 120,000 employees have been layed off in 2022. Tech companies have to adjust to a new reality of deteriorating economic conditions, consumers cutting back on their spending and digital advertisers reducing their investments.
- Days after Elon Musk cut in half the number of employees at Twitter, Meta announced its biggest ever round of layoffs by dismissing 13% of its workforce, or more than 11,000 people
Amazon had already made preparations to stop corporate hiring in its retail division. In recent months, Amazon terminated its telemedicine service, canceled or postponed the opening of some new warehouse locations, closed all but one of its U.S. call centers, killed off its roving delivery robot, and shuttered underperforming brick-and-mortar chains.
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